Compensation experts: Give troops more cash, reduce in-kind benefits

Nov. 5, 2013 - 06:00AM
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Experts told the new commission studying potential changes to the military compensation and retirement system that a top priority should be shifting some long-term and non-cash benefits into more simple and immediate cash payments for troops.

The big pieces of deferred or non-monetary compensation, such as lifelong health care options and a generous retirement plan for the small slice of the force that serves at least 20 years in uniform, may not be the most effective way to recruit, pay and retain service members and sustain the all-volunteer force, experts said.

“It’s a foolish way to dispense compensation,” said Gail Wilensky, an economist who testified before the commission at a public hearing on Nov. 5.

David Chu, a former Pentagon personnel chief, said the military’s current pay structure is flawed because many troops underestimate or don’t fully appreciate the value of long-term and deferred elements of their benefits package

“The in-kind benefits are a risky proposition for the government,” Chu told the commissioners. “Military personnel do not value the in-kind benefits to the same level that they cost the government.”

“The question is: Would the government be better off providing more cash compensation?” Chu said.

Chu and Wilensky were among the experts summoned to testify as the Military Compensation and Retirement Modernization Commission began its first round of public hearings in Virginia.

Congress created the commission earlier this year in response to growing concern that soaring personnel costs, especially for retirement and health care, may threaten the military’s ability to train, equip and sustain the force in an era of declining budgets.

Unlike civilians, troops today receive significant non-cash compensation that is either in-kind benefits or deferred for many years. That includes big-ticket items such as accrual of retirement benefits and the promise of lifetime Tricare coverage for retirees, even into their Medicare years, as well as smaller perks such as tuition assistance and access to Defense Department-run schools, on-base housing and subsidized commissaries.

Some surveys suggest that many troops would gladly give up some of these benefits in exchange for more cash up front.

But some commissioners raised concerns about whether today’s troops, particularly younger enlisted members, could handle the increased responsibility that comes with more cash payments.

“I see the power of the economic principle of cash current versus benefits later ... it is very, very powerful,” said retired Air Force Lt. Col. Mike Higgins, a member of the commission and former longtime senior staffer on the House Armed Services Committee.

“There are, however, people in the military community who would see that as inviting young people, perhaps not of a certain level of maturity and wisdom, to make bad economic decisions,” Higgins said.

He acknowledged that is “a paternalistic perspective; perhaps selling young people short. Nevertheless, I think that streak runs pretty strong in our community. The rational person would conclude that there has got to be some balance.”

Wilensky said she did not support that kind of paternalism. “If we are asking people to put their lives on the line for their country, it seems unreasonable to turn around and say you’re not equipped to make these basic life decisions,” she said.

Chu agreed and noted that today’s troops are generally far more educated than those of previous generations.

The experts’ suggestion that troops may not fully appreciate non-cash benefits was at odds with comments the commission heard on Monday night from an advocate from the National Military Family Association.

Eileen Huck, the Virginia-based group’s deputy director for government relations, said military families place a lot of value on the health care and family services provided to active-duty troops, including access to child care, Defense Department schools and mental health care for their children.

“I think a lot of families are concerned about behavioral health issues with their children,” Huck said at a town hall meeting at Fort Belvior, Va.

The commission is slated to submit formal recommendations to the Congress and the White House in May. The Pentagon initially has declined to provide any new recommendations to the commission as it begins its work.

Some commissioners signaled an interest in sweeping changes to the current compensation system. Yet others suggested the current system has proven unexpectedly resilient and cautioned against change.

Retired Army Gen. Peter Chiarelli, a commission member, pointed to the past 13 years of intense strain and repeated deployments and noted that recruiting and retention has remained relatively strong under the current system.

“If you had told me [in 2001] that we’d be able to do what we’ve been able to do for the past 13 years, I would have told you, ‘There’s no way.’” Chiarelli said at the Tuesday meeting.

“How do we explain that now we are going to start tinkering with this?”